Question

The marketing manager of a well-known automobile engine additive suspects that the use of an in-store display affects the price elasticity of his product. Specifically, he suspects that the presence of an in-store display increases the product’s price elasticity relative to no in-store display. To test this hunch, he would like to do a sales experiment with the 654 retail stores that carry this product. Currently the additive is being sold for $7.99 a bottle.

Specify the variables and groups that would describe the experiment that this manager could use to test this hunch. Explain your choices.

Answer 1

To test his hypothesis, the manager would need to identify its experimental/test group, the group that would have the variable being tested and the control group, that would does not receive the variable he is testing.

For the manager, the experimental group will be the stores that have in store display and the control group would be the retail stores with no in-store display.

The variables -

The factor that is different between the control and experimental groups (in this case, the in-store display) is known as the independent variable. Thus, the independent variable for the study would be the in store display.

The dependent variable is the variable that changes in response to the independent variable. Here the price change of additive is the variable that is being affected by the in-store display. Thus, price would be dependent variable.

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